Business owners may be able to avoid litigation over breaches of business contracts by ensuring that the documents contain all the relevant information in clear, easily understood terms. 

Here are 3 tips for effective business agreements, as provided by the SCORE Association. 

1. Identify all parties

Whether the parties are a company and a vendor, owners entering a partnership, contractors and subcontractors, or professionals and their clients, the contract needs to include legal names and titles of each party. The contract should also include contact information for everyone involved. 

2. List the terms

In plain language, the contract should state the following: 

  • Which parties will complete what tasks 
  • A timeline of the task completion, including deadlines if they are material factors 
  • Deliverables 
  • Compensation details 
  • Ownership of any relevant existing product, future product, intellectual property and real property 
  • Exhibits 

In addition to the timeline for task completion, the contract should specify the length of time it is valid, or state explicitly that it is ongoing. The contract should also specify the manner in which parties may end the contract. For example, a 30-day notice may be appropriate and acceptable. 

3. Choose a conflict resolution method

Litigation over a contract breach should be a last resort, as it is often costly and time-consuming, and court records are available to the public. However, if parties do not agree ahead of time on a conflict resolution method, they could end up facing a lawsuit. Mediation and arbitration are common alternative dispute resolution options. 

The Cornell Law School’s Legal Information Institute explains that in mediation, a neutral third party helps each side to come to an agreement through dispute resolution methods. Arbitration employs a neutral arbitrator or panel of arbitrators who function in a role similar to a judge, listening to all the evidence of both sides and coming to a binding decision. Arbitrators are often experts in the field and may have more frame of reference for the topic at hand than a judge would.